Posted on December 07, 2006 at 10:46:26:
A charitable remainder trust can present win-win opportunities all around: to the charity that benefits from the funds and to the investor who gets a chance to diversify his or her holdings, potentially defer capital gains tax and get tax deductions, too.
The trust provides a fixed stream of payments to the donor or family members over a specified term; what’s left – the remainder – goes to the charity. If the grantor sets up the trust during his lifetime, he gets a federal charitable gift tax deductions and perhaps a federal charitable income tax deduction. A trust created upon death earns a federal estate tax charitable deduction. Because the trust is a tax-exempt entity, it can sell and reinvest the assets without incurring capital gains taxes, perhaps offering a higher income stream.
Now, with interest rates going up, the IRS assumes the charity is earning more; the asset is worth more – and so is the deduction.